When reading the Cash Inflows from Operating Activities portion of the statement of cash flows using the direct method, you would expect to find which of the following?
A) I
B) I and IV
C) I, II, and III
D) I, II, III, and IV

Question

When reading the Cash Inflows from Operating Activities portion of the statement of cash flows using the direct method, you would expect to find which of the following? 
A) I 
B) I and IV 
C) I, II, and III 
D) I, II, III, and IV

Quizplus · Accepted Answer

The Cash Inflows from Operating Activities portion of the statement of cash flows using the direct method should include I) All operating cash receipts such as cash received from customers and interest received, II) All operating cash payments such as cash paid to suppliers and employees, III) All adjustments necessary to convert accrual-based revenues and expenses to cash-based amounts, such as adjustments for changes in accounts receivable and accounts payable balances. Therefore, options I, II, and III are the correct choice. Option IV (cash inflows from investing activities) is not relevant to the Cash Inflows from Operating Activities.

When Reading the Cash Inflows from Operating Activities Portion of the Statement